TORONTO (miningweekly.com) – Construction of the Renard diamond project, Quebec’s only large-scale diamond mine, on Wednesday moved another step closer to materialising after its proponent, Stornoway Diamond Corp, revealed that it had wrapped up negotiations on a series of financing transactions totalling C$944-million.
The TSX-listed project developer said that it had entered into a binding financing commitment agreement with Orion Co-Investments I Limited, Investissement Quebec subsidiary Ressources Quebec (RQ), and the Caisse de depot et placement du Quebec (CDPQ) for the construction of the Renard project.
Under the terms of the agreement, which comprises debt, equity and stream financing, the various funding commitments comprise $360-million from Orion, C$220-million from RQ and C$105-million from CDPQ.
The agreement also provides for a marketed offering of common share subscription receipts and an equipment financing facility with earth-moving equipment manufacturer Caterpillar Financial.
Stornoway said that the transactions were designed to provide full funding until commercial production had been declared, adding that when taken together, the financings represented the largest-ever project-financing package for a publicly listed diamond company.
The company said that a C$427-million offering of common share subscription receipts would comprise C$243-million to be subscribed for by Orion, RQ and CDPQ through private placements in the amounts of $110-million, C$100-million and C$22-million respectively; and C$184-million to be offered to the public through a concurrent prospectus offering in Canada, led by Scotiabank, Dundee Capital Markets and RBC Capital Markets.
Another portion of the total financing would come from a C$275-million diamond streaming agreement that would see Orion pay $200-million for a 16% streaming interest, while CDPQ would pay $50-million for a 4% streaming interest in Renard’s output.
The financing also entails C$155-million in two debt facilities. RQ would extend a C$100-million Tranche ‘A’ senior secured loan, bearing an initial interest rate of prime plus 4.75% with a ten-year term; and Orion would extend a $50-million convertible unsecured loan bearing an interest rate of 6.25%, with a seven-year term.
Stornoway would also have access to a further C$48-million in committed but initially unfunded cost overrun credit facilities, comprising a C$20-million Tranche ‘B’ senior secured loan from RQ and a C$28-million unsecured nonconvertible loan from CDPQ.
Further, Stornoway announced that it had signed a concurrent mandate letter with Caterpillar, to arrange and underwrite an equipment financing facility for a minimum of $35-million, to buy certain mine equipment manufactured by Caterpillar and others, including the project's mobile mining fleet.
Closing of the equipment financing facility would be subject to due diligence, underwriting, credit approval, definitive documentation and other customary conditions precedent, including compliance requirements under applicable laws.
“We are announcing today a comprehensive, one-shot financing package of C$944-million, designed to fund Renard through construction to the declaration of commercial production, and including all contingencies, capital escalation allowances, working capital requirements and financing costs.
“These transactions have been carefully structured through a balance of debt, equity and stream with a goal of allowing full participation by our shareholders in the value that will be created with the project's development. With our permits in hand, and the Renard mine road and aerodrome already in place and ready for use, the successful completion of these transactions will remove the last remaining financing risk for the project and allow principal project construction to commence,” Stornoway president and CEO Matt Manson said.
Shareholders would now vote to approve the financing package at a special meeting scheduled to be held in Montreal at the end of May.